Category: entrepreneurship

People whom are lucky enough to survive a fire tend to be those positioned near an emergency exit, having clocked the evacuation route ahead of time, and are sufficiently alert and agile to jump to action when the time comes. In short, survival is all about being in the right place at the right time, being prepared for the worse, and being ready to act quickly should the need arise.

Now let’s look at how you run your business and position it for a trade sale or public listing. The exit, after all, is your nod to personal survival in the hectic and stressful world of business; in which you cash in at least some of your chips and possibly lie down afterwards completely exhausted in the recovery position.

Firstly, as the entrepreneur, you need to be continually preparing your business for the exit; it needs to be positioned ready for the opportunity. When the alarm goes off indicating the proximity of a circling acquiring party, you need to have everything organised so that due diligence is swift and there are no skeletons in the closet. Everything and everyone has to be accounted for, and in doing so, the value of your business will be higher and your exit sharper.

Secondly, you need to be on your toes to spot the opportunity. Potential acquirers may look more like customers or collaboration partners. The optimum timing for a stock market listing may be fleeting and pass you by whilst you are busy fighting small fires within your organisation. If you have already considered possible routes to exit and done your homework on potential suitors or bourses, you will be tuned in and ready to break cover when the situation arises.

And finally, small businesses tend to be agile to the point of fidgety; chasing their tails and unable to focus. But in this heightened state of anxiety, you are already constantly adapting and seeking new customers meaning that you are also ready to leap to the exit. If needed, the adrenaline on which you and your team are already running can be funnelled into racing to the door; negotiating terms, providing data, speed-reading contracts, and being primed to sign the deal.

All good; but in a real emergency those that remain calm also tend to survive. Blind panic can prevent you seeing the risks and obstacles, and could result in you making a life-threatening decision. You may forget to use the fire extinguisher, you may step on glass, or worse still you might leave your friend behind and regret rescuing them for the rest of your life.

So too in business. The exit is marked in gleaming green, puncturing through the smoke and flames. But if you remain calm and walk steadfastly towards it surveying the land around you, you will make fewer mistakes and have fewer regrets. You’ll be able to secure a better future for your team bringing colleagues along with you, you’ll be able to get a better price for the company, you’ll be able to spend less time personally locked into the business afterwards, you’ll avoid tax pitfalls on the way out, and you’ll look back from the outside with not just relief but happiness that the job was well done.

And remember, don’t go back in until you are told it is safe to do so!

Not all businesses are created equal. When an entrepreneur or group of would-be co-founders set out to start a new venture, their business idea and mindset will often define where on the enterprise spectrum their startup will sit.

At one end, we have the lifestyle business. Using the analogy of the visible light spectrum, this will sit at the low energy red/infrared end. The lifestyle business is, after all, supposed to be relatively easy-going; generating income by doing something that is enjoyable and not over-demanding on time.

Next along, in the relatively low energy orange region, is the consultancy / professional services business. I know accountants, solicitors, management consultants, and so on will be up in arms with this verdict, but frankly these businesses are fairly simple. They may demand plenty of continuous professional development on a personal level to stay up-to-date with legislation and sector developments, but from a business perspective things are relatively straight forward.

The UK is often referred to as a nation of shopkeepers, but these type of businesses are a little more complex. Although effectively a reseller, this business needs product knowledge as well as the ability to efficiently monitor stock, deal with logistics, process returns and even offer on-line e-commerce options. We’ll place the shop business in the yellow region of the spectrum.

Middle of the road, in the green region, is the systems integrator; offering specialist knowledge to create and install systems of products that work well together. All the skills and attributes of the aforementioned businesses apply along with some technical competence to effectively source, deliver and support bespoke options.

Once a business starts to manufacture products, so the complexity really goes up. Sitting squarely in the relatively high energy blue region are, I believe, software companies. Their virtual products don’t require much capital equipment to create, but they do need stage gates to specify, code, support and deliver. This applies equally to web applications, mobile applications, and software as a service (or indeed the older approach of software in a box). This type of business is also highly scaleable and can grow across the globe relatively quickly. Doing so adds complication in customer support, language support, and dealing in different jurisdictions.

Manufacturing physical products (even traditional products like furniture and food) are in the high energy part of the spectrum; shades of blue and indigo. Why? Because the business needs to deal with the bill of materials, a supply chain, the production process, all the associated quality control, warehousing and delivery logistics. As the enterprise grows, along come warranty returns, export controls and worldwide distribution networks. This is all tricky and demanding stuff requiring diverse skills, fantastic management, facilities of equipment, and plenty of resources.

So, what can possibly be worse and command the violet / ultraviolet end of the spectrum? Well that would be the high technology start-up. It’s all of the above, with specialist knowledge, R&D unknowns, patents, and early-stage venture capital thrown in for sure.

Before you start your business, look at your plan through a prism and see what colours come through. Understand the nature of what you might be letting yourself in for, and hopefully the pot of gold will be there for the taking at the end of the rainbow!

As your startup business grows, you’ll be generating all kinds of data. Probably not Big Data like the big boys, but still enough to swamp you with information such that you can no longer see the wood for the trees.

Firstly you’ll probably be collating statistics about your website, using for example Google Analytics. This service has grown over the years to include a myriad of historical and realtime analysis tools including information about where people are located who visit your site, what kind of device they are using, what search terms brought them to you, and which pages caught their eye for the longest time on your site.

Then, if you have a Facebook page or Twitter account, you can receive information about the number of visits, number of retweets, who’s following, who’s stopped following, how many people you’ve reached, and so forth.

And yet, important (and fascinating) all this data might be, it is rather detached from the nub of the matter; how much money is your business making and how are the sales doing? This financial data is often the bit that is overlooked by the eager entrepreneur, and in many ways the recent years of dotcom web 2.o phenomena have fuelled this trend. Many high profile Internet and technology startups have generated value from eyeballs rather than dollar bills, and so social media data becomes more important than financial data.

But, as a small business owner with limited time and resource, you will need to decide what data to collect, what data to analyse, and most importantly what data to act on. Without care, this task can either be wholeheartedly ignored during the day-to-day firefighting, or an action that occurs sporadically when you happen to log into one of your accounts and stumble across the analytics page.

My advice is to include key data analysis as part of a monthly exercise alongside the review of your management accounts. To some, the suggestion of a monthly review of management accounts might come as a shock, but many entrepreneurs do this almost unconsciously. You will probably have a fair idea of your bank balance each month, but now is the time to structure this appraisal a bit more methodically.

So, on reviewing a monthly profit and loss, balance sheet, sales forecast and debtors aging list, that is also the time to look at some other key data; how many website visits, where are the visitors from, are the important (sales generating) pages being visited, and what is the conversion (from visit to closure of a sale) rate like.

By making a specific effort like this, on a regular basis, you are (to paraphrase Cliff Stoll) turning data into information, information into knowledge, knowledge into understanding, and maybe in some cases understanding into wisdom. More importantly, you are also being selective about the data you analyse with a goal in mind so that you can drill down into something useful for your business. By doing this regularly, an important aspect is to look back at the earlier data and see if things are improving each month, each quarter or each year, and most significantly try to understand why.

Each business will benefit from studying different kinds of data beyond the financial data. If you make widgets, you’ll want to look at the inventory, order book, manufacturing process data and quality control. If you run an e-commerce site, you’ll want to focus on your web analytics and conversion rate. If you run a marketing agency, your social media footprint will be important. And so on.

Finally, it is also beneficial to encourage your colleagues to do the same. As a business owner, you can’t be analysing all the data yourself into the future. Once you have decided what is informative, delegate the analysis to someone appropriate fro example in finance, production or marketing. This will then free you up to move on to the advanced level of data analysis which is to spot trends across these reports: did the increased marketing effort that led to more Twitter followers result in more website conversions and higher sales, and did that rush cause the mid-month quality control issue because you started a night shift?

In this day and age, your business activities will be generating a lot of data. Some aspects you will be choosing to measure, others will be being collated in the background by default. The key is to step back and think through what you want to do better understand from all that data and put a bit of focused quality time into to studying it. You’ll learn a lot more that way than trying to just amass data or gleefully ignore it.

One of the things you quickly learn about running a small rapidly growing business is that the sooner you do something, the sooner its impact is felt. Moreover, the ability to do something and then see the result is part of the appeal. Anyone stuck in a Dilbert cartoon in their current place of work will have long forgotten the joys of cause and effect.

It therefore amuses me when I hear some would-be entrepreneurs say they’d like to start their new business when the time is right and that they are just waiting for all the stars to properly align. In many ways it would be better to just get on with it; action this day!

“Fail fast” (“fail often”, “fail forward”) is the gung-ho American Silicon Valley mantra. Whilst failure itself may not be the best tactic, getting on with it and finding out what works and what doesn’t most certainly is. Entrepreneurs need to make many decisions every day, some of them really quite crucial for their business. The skill is making the balanced decision rather than vacillating endlessly for fear that it will turn out to be the wrong decision.

And decisions tend to go hand-in-hand with actions as new courses are set. This agility often leaves larger corporations floundering, and is precisely why disruptions in the market place frequently originate from small medium enterprises spotting an opportunity, deciding to pursue it and responding quickly. This is the entrepreneur’s competitive edge.

It is a double-edged sword, as putting the wrong foot forward through an ill-informed decision could of course trip the whole venture up. The good news is that another quick decision to change course can save the day. And that’s the key; make a choice, do something, review, do some more of the same or do something different all in quick succession with the facts at your fingertips.

The trick is to keep this ethos of fast decision making and rapid response well oiled as your company grows. When it is just you, perhaps a co-founder and a handful of employees, it is easy. But as your company expands and you want to empower your managers to be as nimble-minded with their day-to-day operations, you’ll need them to understand the workings of the business and have any past lessons you learnt accessible to them as they move forward.

It generally boils down to good, frequent communication and centralised, accessible information. And a company structure that promotes this. If this isn’t already in place in your organisation, simply decide to make the change and roll it out today!

Being an entrepreneur brings with it an endless succession of challenges. Thankfully most of them are also interesting; even if some can bog you down in bureaucracy because they revolve around government-induced paperwork and compliance. The forced interest in these cases tend to lie in learning how yet another cog in the nation’s commerce machine works.

But the really interesting things are the range of tasks needed to steer the ship; a ship that is continuously taking on more cargo as it progresses and thus becoming less agile after every nautical mile . At the helm, you’re the one that has to keep an eye on the progress of many tasks as they pass by, hopefully none of them so out of control that they sink the vessel.

One minute you’ll be honing the marketing message on your website, proof reading the brochure going to print, or Tweeting a word of wisdom to your fanbase. The interesting thing is that you now have a basic grasp of website design, typesetting publications, and running a social media campaign.

And then you’ll turn to procurement to see if you can source things a little cheaper, tighten up on the specs of a critical component, or drop ship something somewhere to speed up delivery. Suddenly you have become a logistics guru that understands at least the basics of supply chain integrity.

That sorted, its time to look at stock and fulfilment whilst trying to determine whether its worth outsourcing this entire operation to free up a bit more time. Before embarking on all this, you probably knew very little about warehouse management and the vast business of fulfilment centres.

As you take on more staff, you’ll be guiding them on all these tasks and fretting that they can’t benefit from all your experience to date. You’ll be solving issues around project management and how to successfully motivate a team. Suddenly you’ll have an interest in human resources, successful recruitment techniques, and employment law that you never thought possible. And you’ll be trying to find out more about effective communication software packages, enterprise resource planning, and how to delegate rather than micro-manage.

Then, just when you think you have the general hang of day-to-day operations as your venture expands around you, the unexpected one-offs come along. These are where you really have to learn quickly on the job; someone wants to do a joint venture, you need to pitch for for your first tranche of venture capital finance, or a suitor has suggested acquiring all of your company.

As long as you set out willing to expect the unexpected and accept you’ll never know all the answers when you need them, entrepreneurship is an exhilarating experience. Boredom, thankfully, is not on the menu.

And if you can start out with a modicum of organisation and structure, the journey can be even more exciting because you’ll have more time to be circumspect and soak it all in.

A report published just over a year ago by Sherry Coutu CBE, non-executive director of the London Stock Exchange, titled “The Scale-up Report on UK Economic Growth” highlighted some of the challenges of ensuring that small medium enterprises are supported sufficiently to provide the desired impact on our economy.

Startups have received a lot of attention in recent years with the promotion of an entrepreneurial culture to encourage would-be entrepreneurs to take a measured risk and start their own business. Initiatives like Startup Britain have been tracking the record number of yearly company incorporations in the UK, highlighting how this pipeline of new companies is boosting economic growth for the nation.

The issue, of course, is that many new companies fail to grow or simply fail outright. The real economic benefit comes not from the sole-trader or micro-enterprise but from the rapidly growing SME.

Sherry defined a Scale-up as “an enterprise with average annualised growth in employees or turnover greater than 20 per cent per annum over a three year period, and with more than 10 employees at the beginning of the observation period.”

This may sound manageable, but in reality if you are the founder on the ground orchestrating this rapid growth, you have numerous balls in the air and a whole host of issues to worry about. As Sherry stated, “In growing from 10 to 100 employees, to 500, 1,000 and so on, companies have specific requirements for capital, management, skills and organisational processes.”

Communication within a rapidly expanding team can be fraught, cashflow can be excruciating, and seeking new customers exhausting. Using an engineering analogy, it is during this period that the company’s foundations, processes and ethos are stress-tested way beyond specification. In short, Scale-ups need all the help they can get if they are to succeed in this fiercely competitive world.

I also believe another key factor in the success of a Scale-up is having the simple, streamlined organisational processes in place from the outset. If the company starts poised for growth, it will find the journey much smoother. Don’t build your enterprise foundations on sand; underpinning is expensive in both civil engineering terms and enterprise organisation terms.

So this means thinking at the earliest opportunity about how your company might grow. What job functions are you likely to have in the business down the line? Who will need to know what information? How will new staff be quickly inducted into the ethos of the company so they can hit the ground running? How will you ensure the right templates, correct price lists, most up-to-date presentations, and so on, are used by all throughout the organisation? This is some of the nitty gritty of the internal challenges faced in the rapidly growing SME.

So although more Scale-ups are indeed needed, one of the key things that will help them emerge is a pipeline of well organised and spring-loaded startups.